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stock watch, stock recommendation
Begin part 3 of 3
THE PLAYS:
Upside: Looking ahead to a bounce on the announcement of the bailout deal
Play Date: 09/25/2008
DO (Diamond Offshore--$114.78; +1.11; optionable): Offshore drilling
http://biz.yahoo.com/p/d/do.html
EARNINGS: Third week October
STATUS: Trend reversal. After falling from the May peak, DO formed a reverse head and shoulders bottom over the past six weeks, gapping higher last Friday then spending all this week moving laterally over the 50 day EMA (112.70), working on low volume. Nice flat lateral move with money flow moving up. Rig is solid and DO is always a favorite of ours in the sector. It is a nice set up. Some resistance at the 200 day SMA (123.46), but looking for this move to be strong enough to break through though it will stall there at first.
Volume: 1.082M Avg Volume: 2.063M
BUY POINT: $115.65 Volume=2.8M Target=$129.95 Stop=$112.54
POSITION: DO LC - Dec. $115c (59 delta) &/or Stock
http://www.investmenthouse.com/ci/do.html
Play Date: 09/25/2008
MTH (Meritage--$24.97; +0.50; optionable): Homebuilder
http://biz.yahoo.com/p/m/mth.html
EARNINGS: 10-27-08
STATUS: Test breakout. MTH gapped higher the first week of September, clearing a five month cup base, its first base off of the bottom of its 2.75 year decline. Solid volume on the break, then it got quite volatile during the credit freeze last week and the bailout announcement. It has calmed, holding the 18 day EMA (24.53) as it tests this week, filling the gap on the intraday lows and rebounding while holding the breakout on the close. Strong money flow held up and is moving higher. On a new upside break on better volume it is a buy despite the issues with the bailout plan.
Volume: 1.092M Avg Volume: 1.028M
BUY POINT: $25.68 Volume=1.5M Target=$30.95 Stop=$24.08
POSITION: MTH LE - Dec. $25c (61 delta) &/or Stock
http://www.investmenthouse.com/cd/mth.html
Play Date: 09/25/2008
VLO (Valero Energy--$35.71; +1.71; optionable): Oil and gas refining
http://biz.yahoo.com/p/v/vlo.html
EARNINGS: Late October
STATUS: Flat base. VLO is preparing for the breakout from a 10 week flat base formed after the 12 month plus downtrend. A series of lower highs below the 90 day SMA (37.77), but this flat lateral pattern is showing the tide is changing. Looks great for a break higher and to start working upside to form the right side of its big base. Ben in slumber for quite a while and that is when you look for it to make the turn.
Volume: 12.437M Avg Volume: 13.318M
BUY POINT: $36.32 Volume=18M Target=$42.95 Stop=$34.48
POSITION: VLO AG - Jan. $35c (59 delta) &/or Stock
http://www.investmenthouse.com/ci/vlo.html
Downside: Market will open down so we will need to watch for a bounce back up and look for a failure. With the bailout plan still lurking, however, this is aggressive and would prefer to move in after the bounce occurs.
Play Date: 09/25/2008
DIA (Diamonds Trust (DJ30 EFT)--$110.27; +1.97; optionable)
http://biz.yahoo.com/p/d/dia.html
STATUS: Put. This play depends upon whether the Dow fails at near resistance at the 10 day EMA (110.50) after already falling hard earlier in the week. If it does that is a sign of some impressive weakness. Will open lower and we will sit on it while it does then watch to see the test and whether it fails at the 10 day EMA again. That will give some confirmation of the weakness but of course the 'plan' is still out there and when it is announced it will very likely deliver a market bounce. That makes this an aggressive play for the nimble and the aggressive. Again, prefer to move in after a bailout induced bounce but just want to be ready. A move to the target lands a 41%ish gain.
Volume: 27.647M Avg Volume: 26.272M
BUY POINT: $109.97 Volume=33M Target=$107.25 Stop=$110.71
POSITION: DIA VF - Oct. $110p (-51 delta)
http://www.investmenthouse.com/ci/dia.html
Play Date: 09/25/2008
SPY (S&P Depository Receipts--$120.79; +1.86; optionable)
http://biz.yahoo.com/p/s/spy.html
STATUS: Put. Similar to DIA, the SP500 ETF is bouncing to test the 10 day EMA (121.15) after some hard selling earlier in the week. Will start lower Friday but will watch if and how it recovers. It will start lower Friday so we won't have much of a play at the open and will have to watch the test and keep the plan approval in mind. As with DIA, prefer to move in after the plan is announced and the bounce on the news caps out.
Volume: 328.253M Avg Volume: 302.761M
BUY POINT: $120.62 Volume=350M Target=$117.15 Stop=$121.31
POSITION: SPY VQ - Oct. $121p (-57 delta)
http://www.investmenthouse.com/ci/spy.html
Good Investing!
Jon L. Johnson and The Daily Staff
All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners of Online Investment Services, LP or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors.
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stock watch
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